Hit by a perfect storm of heightened regulatory scrutiny and
a tougher business climate, life sciences companies are scrambling to find ways
to cut costs and expand revenue. This has led to a growing trend across the
life sciences industry as all departments, including research and development,
are no longer considering if and when they should outsource, but how much.

In a supercharged business and regulatory climate, life
sciences companies large and small are turning to outsourcing vendors to manage
tactical tasks and help them adopt best practices. In a constrained business
environment, companies are finding that good partnerships bring added
efficiencies, the potential for greater market share and the skills and
capabilities that enable products to be brought to market more rapidly and
maintained well in diverse markets.

There are many reasons why companies turn to outsourcing
partners: additional capacity, resource flexibility, cost savings, developing a
new capability, process improvement and process standardization, to name a few.
Given that regulatory submissions have quiet and busy periods, outsourcing
offers a cost-effective and flexible way to manage the peaks and valleys
without the need to retain a large in-house staff.

The growth of electronic submissions has encouraged
companies to turn to outsourcing partners more frequently to manage product
submissions. In part, this is a response to the need for additional resources
to support affiliates, but it is also a result of electronic submission
standardization that has allowed for greater consistency in how submissions are
handled across geographies. It means regulatory practices that once were quite
fragmented are more streamlined, allowing vendors to step in and manage
clients' submissions quickly and consistently.

While staff at pharma companies frequently handle such tasks
as regulatory submissions, vendors do so day-in and day-out for various
clients, thereby developing a level of proficiency that no pharma company could
hope to emulate.

What's in and what's
out

Regulatory outsourcing is now fairly well-established, with
a large number of companies turning to partners to manage operational tasks,
including report publishing and submission publishing. A smaller number have
engaged partners to assist with submission planning and regulatory data
management, and while only a small percentage are using outsourcing partners
for regulatory information management, many plan to do so in the future.

Across
the industry, companies are waking up to the plethora of regulatory data that
need to captured and updated, and more are assessing whether this may be best
handled by an outsourcing partner.

The one constant in outsourcing is change. While companies
were once reluctant to outsource anything other than back office tasks, that's
no longer the case.

In a survey on R&D outsourcing conducted by KPMG of 12
pharmaceutical companies, less than half keep analytics in-house, with the
remainder outsourcing this to some degree. All companies, however, retain their
genomics entirely. Whether that will change in the coming years remains to be
seen, but as Vicki Phelan of KPMG notes, many areas that are now being
outsourced would not have been just five years ago.

Regulatory leaders from several major companies note that
almost all aspects of regulatory operations, with the exception of dossier
management, are likely to be outsourced in the near future. Almost all,
however, say establishing the regulatory strategy and managing the interaction
with the agency will remain in-house.

But how much a company is willing to outsource and the way
it chooses to partner varies significantly. While one leading pharma company
has chosen to outsource regulatory functions to a significant degree, another
has taken a shared-services approach, a third is still trying to find its
comfort zone with outsourcing and a fourth is constantly changing its vendor
partners. The trend in outsourcing, therefore, is that companies are doing it,
but how and why is far from cohesive.

The pros and cons of
offshoring

Life sciences companies are accustomed to partnering with
local vendors and contractors, but with the growth of emerging markets and
senior management eager to cut costs, many are looking farther afield. With
reduced overheads and access to highly skilled personnel, offshore outsourcing
has a lot to recommend it.
Salaries and overheads are substantially lower in emerging
markets, allowing companies to realize dramatic cost savings.

Equally appealing
is the promise of follow-the-sun capacity, meaning submissions can be worked on
around the clock and thus delivered to agencies far more rapidly. As the
traditional markets of Europe and the North America diminish, the need to
expand into emerging markets has become a central plank in the business plan.
Having an offshore partner in some of those key emerging markets, therefore,
gives companies access to local expertise and knowledge of how regulators in
those countries like or expect to receive submissions.

Despite the benefits, several lingering concerns remain.
Data security is high on the list of concerns, as is providing systems access
to a third party in a secure way.

Companies also worry about the reliability of
offshore partners, the seamlessness of handing over critical tasks, as well as
how that relationship will be managed from afar. While offshoring promises extensive
cost savings, companies do worry whether these savings are sustainable over
time, particularly as jobs markets tighten.

Offshoring also raises concerns around business continuity
and disaster recovery. For example, if a company has outsourced document submissions
to a China-based vendor and that partner is affected by a natural disaster that
causes a business interruption, companies need to know what programs and
policies are in place to ensure timelines can be met. Before signing a contract
with a vendor, life sciences companies need to ensure offshore partners have
the infrastructure in place to manage disruptions or disasters, and know that
they can trust that partner to follow through.

As some companies are finding, it is imperative to do full
due diligence when contracting with an offshore partner. If a vendor has a high
staff turnover, problems with consistency are inevitable. It is also important
to ensure the vendor partner is trained in the company's systems and processes
and that good relationships are established between the groups that will work
together.

Connected vs.
fragmented

A pervasive problem in pharmaceutical outsourcing,
particularly within R&D, is fragmentation. Rather than taking a cohesive
approach to engaging outsourcing partners or developing a strategy that cuts
across departments, each function has turned to its own preferred vendors to
manage various aspects. However, there is a heavy cost implication to this
siloed approach. Instead, companies need to take a broad look at their
partnerships and determine how best to streamline their use of vendors.

Recognizing the cost and time-saving potential of a single-source solution for
submission management, one leading biopharmaceutical company has chosen to
outsource its entire document publishing process to a trusted partner, though
what it refers to as dossier management, or the broader oversight of the entire
submission, will be retained in-house.

Increasingly, companies are looking for partners that can
provide end-to-end support, including the technology, the processes and the
people. Process improvement is a critical need for companies, so partners that
can deliver that capability are keenly sought.

Managing the relationship

While almost all life sciences companies are outsourcing
large parts of their business, many are dissatisfied with their vendor
relationships. A Business Insights report notes that 35 to 55 percent of
sponsors are dissatisfied with projects. This high rate of disapproval suggests
far too many partnerships are being entered into without due process.

Before
embarking on an outsourcing partnership, companies need to establish some
critical parameters.
First, an appropriate governance structure that is properly
funded and staffed is vital, as is setting and defining expectations. Next, regulatory leaders say a relationship manager needs to
be appointed to ensure there is cultural consistency, and to step in when
issues need to be resolved. That person needs to be adept not only at dealing
with the executive level, but also must be in tune with what's happening at an
operational level and be able to bridge gaps between the two groups.

A
proactive way of managing feedback between the partners is also regarded as
vital to successful outcomes.

Success also requires the involvement and buy-in of senior
management and all the stakeholders. Equally, it is imperative to establish and
stick to parameters, be those cost, process or timelines, and create a
transparent environment for collaboration. Given the high percentage of dissatisfaction,
it also makes sense to prepare for possible failure and be prepared to make
contingency plans.

Lastly, experts say partners need to establish how outcomes
will be measured relative to the client's needs, be that service-level metrics
or deliverables. These parameters are all the more important because of the
geographical distance that is likely to exist between client and vendor
partner.

The future for regulatory outsourcing is bright and
expansive. Life sciences companies have a lot to gain through good
partnerships, but rushed and ill-considered collaborations potentially could
cost organizations more than they save.

Paul Chung is director of CSC Life Sciences' Regulatory
Solutions Group practice, where he oversees all aspects of the company's
research and development, quality management and global regulatory services
delivery functions, as well as CSC's offshore operation in Tianjin, China.